- Read the case study “American Apparel: Drowning in Debt?”
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2.Use the Excel data file to conduct an analysis of the company’s financial statements. You will complete this analysis using tools such as trend analysis, common size statements, and financial ratios.
Suggested minimum analysis to conduct:
Leverage Ratio Analysis
Ratio of Total Liabilities-To-Total Assets
Ratio of Long-Term Liabilities-To-Equity
Ratio of Total Liabilities-To-Equity
Coverage Ratio Analysis
Interest Coverage Ratio
Liquidity and Solvency Ratio Analysis
Current Ratio
Quick Ratio
Efficiency Ratio Analysis
Working Capital Turnover
Inventory Turnover
Receivable Turnover
Profitability Ratio Analysis
Net Profit Margin Ratio
Gross Profit Ratio
Rate Earned on Equity
Rate Earned on Assets
Cash Performance
Operating Cash Return on Equity
Operating Cash Return on Assets
Operating Cash Return to Revenue
Address the following items/questions:
Using a financial ratio analysis, evaluate American Apparel’s financial performance for the past five years.
Analyze the company’s financial statements on the basis of its common size statements. What additional insights do these statements provide?
In your opinion, does American Apparel have an asset management problem? If so, what is the nature of the problem (for example, fixed assets, receivables, inventory, or other)?
On the basis of the financial performance analysis, what actions do you recommend to prevent the company from falling further into debt?
In addition to a narrative explaining your answers, include charts or graphs that illustrate your conclusions. Embed these charts and graphs into your narrative as well as provide a separate Excel document. Cite your work in MLA format.